Lebanon Utilities PILOT

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Overview

The City of Lebanon chose to accept the maximum allowed Payments in Lieu of Taxes (PILOT) from our Lebanon Utilities when the following Resolution No. 2010-07 was adopted by our Lebanon City Council (and approved by then Lebanon Mayor Huck Lewis) on December 13, 2010: In accordance with Indiana Code 8-1.5-3-8(g), the Common Council of the City of Lebanon (“City”) hereby elects to transfer to the City’s General Fund, a payment in lieu of taxes from the rates and charges of Lebanon Utilities in an amount sufficient to compensate the City for taxes that would be due the City on the property owned by Lebanon Utility as if the property were privately owned.

The pertinent Indiana Code section reads as follows:
IC 8-1.5 ARTICLE 1.5. MUNICIPAL UTILITIES
IC 8-1.5-3 Chapter 3. Operation of Municipally Owned Utilities Generally
IC 8-1.5-3-8 Rates and charges
   
(g) Except for a municipally owned utility taxed under IC 6-1.1-8-3, the commission shall approve rates and charges sufficient to compensate the municipality for taxes that would be due the municipality on the utility property were it privately owned. These rates and charges in lieu of taxes may be transferred to the municipal general fund, if the legislative body so elects.

Our Lebanon Utilities must compute each year the property tax that it would pay to the City if it were privately owned, AND this amount must be included in the expenses that are covered by the utility rates used to compute the month bill paid by all Lebanon Utility customers. In other words, Lebanon Utilities ratepayers must pay the property tax equivalent PILOT as part of of their monthly bill.

Our Lebanon City Council (with the approval of our Mayor) has the option whether or not to require the PILOT payments for any one year to be transferred to the City’s General Fund. If the City declines to accept the PILOT payments, then the PILOT amounts would become a revenue source - without utility rate increases - to meet the capital project needs of our wastewater, electric, water, and telecommunications departments.

The spreadsheet below details the history of Lebanon Utilities PILOT payments made to the City's General Fund going back to 2001. Significant increases in the PILOT payments began in 2011 because the City chose through Resolution No. 2010-07 to require the maximum payments allowed by state law. Some factors pertinent to these significant PILOT increases include the following:
(a) from 2001 through 2005 our Lebanon Utilities loaned $580,418.66 to the City for the up front costs on the new Municipal Building;
(b) the City was to re-pay our Lebanon Utilities loan over a period of five years starting in 2006;
(c) the City made three equal loan payments of $25,000 each in 2008, 2010, and 2011 leaving a loan balance of $505,418.66;
(d) the City adopted Resolution No. 2010-07 to increase our Lebanon Utilities PILOT payments beginning in 2011 to the maximum allowed by state law;
(e) the PILOT payments increase was applied to our Lebanon Utilities loan from 2011 through February 2014 taking the loan balance to zero.

Lebanon Utilities PILOT History 2001-2019

PILOT = Payments In Lieu Of Taxes from Lebanon Utilities to the City's General Fund

(Compiled May 18, 2019)

SOURCES: 

(1) March 4, 2019, E-mail from the Lebanon Utilities Chief Financial Officer.
(2) May 17, 2019, E-mail from the Lebanon Utilities Chief Financial Officer.

Year

Electric

Water

Wastewater

Telecommunications

Total

2019 Actual

$176,738

$159,044

$220,217

$2,369

$558,368

2018 Actual

$164,823

$146,038

$206,142

$2,589

$519,592

2017 Actual

$164,899

$132,985

$208,877

$2,508

$509,269

2016 Actual

$139,574

$130,558

$207,619

$2,617

$480,368

2015 Actual

$136,728

$134,296

$214,070

$2,327

$487,421

2014 Actual

$109,175

$124,203

$207,814

$1,948

$443,140

2013 Actual

$96,950

$125,171

$208,240

$1,494

$431,855

2012 Actual

$80,880

$105,313

$185,181

$1,957

$373,331

2011 Actual

$64,021

$88,638

$165,397

$1,956

$320,012

2010 Actual

$61,500

$112,164

$40,042

$1,318

$215,024

2009 Actual

$61,500

$112,164

$40,042

$1,318

$215,024

2008 Actual

$61,500

$112,164

$40,042

$1,318

$215,024

2007 Actual

$61,500

$112,164

$40,042

$1,318

$215,024

2006 Actual

$61,500

$112,164

$40,042

$0

$213,706

2005 Actual

$61,500

$112,164

$40,042

$0

$213,706

2004 Actual

$61,500

$112,164

$40,042

$0

$213,706

2003 Actual

$61,500

$112,164

$40,042

$0

$213,706

2002 Actual

$66,625

$121,511

$43,378

$0

$231,514

2001 Actual

$56,375

$102,817

$36,705

$0

$195,897

TOTALS

$1,748,788

$2,267,886

$2,223,976

$25,037

$6,265,687

Electric

Water

Wastewater

Telecommunications

Grand Total

NOTE: One 2001 payment crossed over to 2002.

 

PILOT Public Policy Improvement: Lebanon Taxpayer & Ratepayer Friendly Suggestion

Change Lebanon City Council Resolution No. 2010-07 to state the following: In accordance with Indiana Code 8-1.5-3-8(g), the Common Council of the City of Lebanon (“City”) hereby elects to decide during its budget work sessions each year whether or not to transfer to the City’s General Fund the next year, a payment in lieu of taxes from the rates and charges of Lebanon Utilities in an amount up to what is sufficient to compensate the City for taxes that would be due the City on the property owned by Lebanon Utility as if the property were privately owned.

This suggested Resolution change would enable our City to eliminate the PILOT payments for the next budget year, or to accept PILOT payments that vary in amount up to the maximum that is allowed. Our Mayor and City Council could receive information about planned Lebanon Utilities capital projects during the budget work sessions, and then decide to eliminate or limit the PILOT payments for the next budget year. The operations of our Lebanon Utilities could be evaluated during the budget work sessions each year to determine whether or not it would be good public policy for the City to accept PILOT payments the next budget year.

Eliminating or limiting the PILOT payments would benefit our Lebanon Utilities Ratepayers (who are also our City Taxpayers) by providing more money for needed utility capital projects without utility rate increases.

 

Lebanon Utilities Wastewater PILOT Impact

Current Lebanon Utilities budget projections indicate that Wastewater is our only utility department where a rate increase might be needed prior to December 2022.

Our Wastewater Utility projected end-of-year cash balances are as follows:
2019 = $2,784,403
2020 = $1,963,066
2021 = $1,636,309
2022 = $1,150,076
2023 = ($239,008)
2024 = ($1,017,669)
Projected capital expenditures would have to be decreased by $1,256,677 to avoid negative cash balances in 2023 and 2024. What this probably means is that the planned 2023 replacement of the Indianapolis Avenue lift station could not be accomplished.

The 2019 Lebanon Utilities budget includes the following LU PILOT payments to the City’s General Fund:
$214,531 from the Wastewater Utility
$180,337 from the Electric Utility
$145,625 from the Water Utility
$ 2,433 from the Telecommunications Utility
$542,926 TOTAL from Lebanon Utilities

If $214,531 in Wastewater Utility PILOT payments were eliminated starting in 2020, our Wastewater Utility projected end-of-year cash balances would improve as follows:
2019 = $2,784,403
2020 = $2,177,597 (versus $1,963,066 if the PILOT is not eliminated)
2021 = $2,065,371 (versus $1,636,309 if the PILOT is not eliminated)
2022 = $1,793,669 (versus $1,150,076 if the PILOT is not eliminated)
2023 = $619,116 (versus a negative $239,008 if the PILOT is not eliminated)
2024 = $54,986 (versus a negative $1,017,669 if the PILOT is not eliminated)
All our needed Wastewater capital projects through 2024 could be completed without a rate increase!

Eliminating the Wastewater Utility PILOT payments would benefit our Lebanon Utilities Ratepayers (who are also our City Taxpayers) by providing the funds necessary to complete our needed Wastewater capital projects through 2024 without a rate increase.

 

City Cash Balances Maintained Without PILOT Payments

By City Council Resolution 2010-07, our City has chosen since 2011 to deposit the maximum allowed PILOT payments from our Lebanon Utilities into the City’s General Fund.

The following spreadsheet shows that during the past seven years our City’s General Fund cash balance has increased more than 213 percent (our City’s population has grown less than 3 percent from 15,732 to 16,200):

Lebanon Civil City Cash Balances

Governmental Activities (Excluding Lebanon Utilities)

(Compiled April 4, 2019)

Source: "Cash and Investments" Core Financial Report accessed through "Annual Financial Report" link

             at https://gateway.ifionline.org/report_builder/ 

Local Fund Category

12/31/2011

12/31/2018

% Increase

General Fund

$1,755,694

$5,498,645

213.19%

Local Income Tax For Public Safety

$2,761,805

NEW TAX

Motor Vehicle Highway

$228,409

$1,565,834

585.54%

Local Road And Street

$48,131

$269,352

459.62%

Parks Department

$74,492

$1,235,816

1,558.99%

2016 LOIT Special Distribution (75%)

$272,796

2016 LOIT Special Distribution (25%)

$69,071

Rainy Day Fund

$1,709,291

$1,759,810

2.96%

Cumulative Capital Improvement

$67,814

$285,699

321.30%

Cumulative Capital Development

$616,442

$662,833

7.53%

Food And Beverage Tax

$849,187

$2,066,411

143.34%

Other Local Fund Categories

$3,783,432

$8,885,923

134.86%

Total Cash Balance

$9,132,892

$25,333,995

177.39%

The following spreadsheet details how during the past seven years that the PILOT payments from our Lebanon Utilities to our City’s General Fund have totaled $3,244,976:

Lebanon Utilities PILOT History 2012-2018

PILOT = Payments In Lieu Of Taxes from Lebanon Utilities to City of Lebanon General Fund

(Compiled April 29, 2019)

SOURCE: March 4, 2019, E-mail from the Lebanon Utilities Chief Financial Officer.

Year

Electric

Water

Wastewater

Telecommunications

Total

2018 Actual

$164,823

$146,038

$206,142

$2,589

$519,592

2017 Actual

$164,899

$132,985

$208,877

$2,508

$509,269

2016 Actual

$139,574

$130,558

$207,619

$2,617

$480,368

2015 Actual

$136,728

$134,296

$214,070

$2,327

$487,421

2014 Actual

$109,175

$124,203

$207,814

$1,948

$443,140

2013 Actual

$96,950

$125,171

$208,240

$1,494

$431,855

2012 Actual

$80,880

$105,313

$185,181

$1,957

$373,331

TOTALS

$893,029

$898,564

$1,437,943

$15,440

$3,244,976

During the past seven years, our City’s General Fund cash balance increased $3,742,951 (from $1,755,694 to $5,498,645). Our City’s General Fund cash balance increase was almost half a million dollars more than the total seven-year PILOT payments of $3,244,976 received from our Lebanon Utilities. It is evident that our City’s ample revenues can maintain sufficient cash balances in all our local City funds WITHOUT any PILOT payments from our Lebanon Utilities.

Using our City’s ample revenues to eliminate the PILOT payments would benefit our Lebanon Utilities Ratepayers (who are also our City Taxpayers) by helping provide the funds necessary to complete our needed utility capital projects without utility rate increases.

 

PILOT Payments NOT Needed To Pay For City Services

By City Council Resolution 2010-07, our City has chosen since 2011 to deposit the maximum allowed PILOT payments from our Lebanon Utilities into the City’s General Fund. This public policy might make sense IF our City needed the PILOT revenues to pay for the City services provided to our Lebanon Utilities.

The following spreadsheet shows that during the past seven years our City’s various tax receipts have increased significantly more than our City’s population growth of less than 3 percent (from 15,732 to 16,200 citizens):

                              Lebanon Civil City Detailed Receipts

                            Governmental Activities (Excluding Lebanon Utilities)

(Compiled April 4, 2019)

Source: "Detailed Receipts" Core Financial Report accessed through "Annual Financial Report" link

             at https://gateway.ifionline.org/report_builder/ 

Receipt Category

2011

2018

% Increase

General Property Taxes

$3,990,299

$6,286,217

57.54%

County Option Income Tax

$2,248,843

$5,193,523

130.94%

Local Income Tax For Public Safety

$2,956,935

NEW TAX

Food And Beverage Tax

$346,569

$416,656

20.22%

Motor Vehicle Highway Distribution

$380,250

$736,810

93.77%

Local Road And Street Distribution

$85,552

$281,075

228.54%

2016 LOIT Special Distribution

$428,806

Payroll Fund Total Receipts

$5,268,356

$8,097,410

Other Receipts

$7,606,414

$11,532,858

Total Receipts

$19,926,283

$35,930,290

Our hefty highway, road, and street local revenue increases are largely the result of ongoing per-gallon gasoline, special fuel, and motor carrier surcharge tax hikes that were first imposed by the state in 2017.

Large local income tax increases include the new Local Income Tax For Public Safety.

There have also been significant revenue increases from both the existing Property Tax and Food And Beverage Tax.

This is the bottom line: PILOT payments from our Lebanon Utilities are no longer needed to subsidize our City government because recent increases in existing taxes, along with the imposition of new taxes, have provided ample revenues to pay for the City services provided to our Lebanon Utilities. Every PILOT dollar paid by Lebanon Utility Ratepayers (who are the same persons paying the new and increased taxes) should stay with our Lebanon Utilities for reinvestment in our utilities infrastructure.

 

Lebanon Utilities Rate Increases Impact

Eliminating or limiting the PILOT payments made by our Lebanon Utilities to our City’s General Fund would benefit our Lebanon Utilities Ratepayers (who are also our City Taxpayers) by providing more money for needed utility capital projects without utility rate increases. Our Ratepayers will have more discretionary income if our City Council avoids utility rate increases by eliminating or limiting the PILOT payments.

Some of our Ratepayers will have more money to save for emergencies, college education, and retirement if utility rate increases are avoided. Sadly, too many of our neighbors need to have our City Council avoid unnecessary utility rate increases so they can continue to buy enough food, afford needed medicines, clothe their children, and pay the rent.

Listed next are some facts regarding how unnecessary utility rate increases would harmfully impact many of our Lebanon neighbors who are already struggling with low incomes and food insecurity.

Low Income Households. “Real Life. Real Choices. – Understanding and Supporting Youth and Families in Poverty” was an April 24, 2019, workshop sponsored by the Indiana Youth Institute and conducted at Lebanon High School by two representatives from the United Way of Central Indiana. Detailed information about the economic condition of our local households was provided from the United Way ALICE Project: see https://www.iuw.org/alice. ALICE is an acronym for Asset Limited Income Constrained Employed. Although persons in ALICE households are employed and have incomes above the Federal Poverty Level, the incomes are not enough to keep an unexpected bill from forcing them to make tough choices such as deciding between quality child care, enough nutritious food, good health care, safe transportation, or paying the rent. Some pertinent data about our local ALICE households with two adults, one infant, and one preschooler include the following:
(a) the 2016 Boone County ALICE household survival budget (that covers the cost of basic household expenses without savings, a smartphone, and basic home internet) was $59,304 ($29.65 hourly wage);
(b) the Central Indiana Federal Poverty Level income is $24,300 per year;
(c) 45% of the total 6,964 Lebanon households in 2016 had incomes below the ALICE survival level or the Federal Poverty Level;
(d) 65% of the jobs in Central Indiana pay less than a $20 hourly wage;
(e) public and private assistance provide support to many households earning below or slightly above the Federal Poverty Level, but less support is provided to ALICE households whose income is above Federal Poverty eligibility levels.

Child Food Insecurity. “Understanding the Impact of Child Food Insecurity” was the topic of a February 27, 2019, meeting at the Lebanon Public Library that was sponsored by the Indiana Youth Institute (along with other community partners). Detailed Boone County information was provided by two local Purdue Extension presenters. One important resource was the 2019 Indiana KIDS COUNT Data Book: see https://s3.amazonaws.com/iyi-website/data-book/2019+Data+book+/2019_IYI_Databook_022619.pdf. The USDA defines food insecurity as a state in which “consistent access to adequate food is limited by a lack of money and other resources at times during the year.” Some pertinent local child food insecurity data include the following:
(a) more than 1 in 6 Hoosier children (17.7%) are food insecure;
(b) child food insecurity in Boone County is 12.9%;
(c) in Lebanon, 40.8% of the school children received free or reduced price meals during the 2018-19 school year;
(d)
in Indiana, 29% of food insecure Hoosier children are likely ineligible for the federal Supplemental Nutrition Assistance Program (SNAP), Women, Infants, and Children (WIC), and National School Lunch Program (NSLP);
(e) in Indiana the past year, 16.1% of households with children younger than 18 received monthly SNAP benefits that averaged $118 per individual;
(f) according to the National Survey of Children’s Health, in the past year 10.6% of Hoosier families with children received monthly WIC benefits that averaged $32.72 per household;
(g) food insecure children are more likely to have repeated a grade than food secure children;
(h)
the local Shalom Summer Program provided 22,000 meals to 4,500 children in 2018.

Senior Citizen Food Insecurity. Beginning January 2019, Gleaners Food Bank (in partnership with The Caring Center) brings a mobile food pantry to Lebanon’s National Guard Armory the third Tuesday of every month. This mobile food pantry is open to Boone County senior citizens age 55 and older. If you go to the National Guard Armory on the third Tuesday of any month, you can tell that Lebanon has a problem with senior citizen food insecurity by observing the multitude of our senior neighbors at the mobile food pantry.

Our City Council. with the approval of our Lebanon Mayor, must eliminate or limit the PILOT payments made by our Lebanon Utilities to our City’s General Fund to avoid utility rate increases that would unnecessarily harm too many of our vulnerable neighbors.

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This page was last updated on 05/18/19.